Global markets plunge as China reacts to Trump’s steel tariffs

Global markets have dropped sharply after China retaliated against Donald Trump’s decision to impose tariffs on steel and aluminium, fuelling fears of an all-out trade war between the world’s two largest economies.

Hours after the US president announced moves to tackle what he believes are unfair trade practices, China signalled it would hit US goods such as pork, apples and steel pipe with higher duties.

China’s commerce ministry urged Washington to negotiate a settlement as soon as possible but set no deadline.

A ministry statement on Friday said the higher US tariffs “seriously undermine” the global trading system.

“China doesn’t hope to be in a trade war, but is not afraid of engaging in one,” the statement said. “China hopes the United States will pull back from the brink, make prudent decisions, and avoid dragging bilateral trade relations to a dangerous place.”

The news sent the Dow Jones Industrial Average down 724 points or 2.93% on Thursday, and the rout continued in Asian markets. The Nikkei 225 in Toyko closed 4.51% lower, while shares in Hong Kong fell 2.45%, the CSI300 in Shanghai lost 2.86% and the Kospi in Seoul was down 3.37%. In Australia, which exports more iron ore to China than any other country, the ASX200 benchmark index was off nearly 2%.

In Europe, the FTSE 100 was down nearly 1% at 6883 in mid-morning trading, a new 15 month low and pushing the leading index firmly into correction territory, down 10% since its recent peak in late January.

Germany’s Dax and France’s Cac have both dropped by about 1.8%. Despite the US move on China, the EU is one of the regions which has been given a temporary exemption from the steel tariffs.

At the European summit in Brussels, the UK prime minister, Theresa May, said she welcomed the exemption and was working with other EU leaders to try and make it permanent. She said: “We will be talking about what the next steps might be. I have stayed on to talk about these next steps because the steel industry is hugely important to the UK and the British government and I want to ensure that steel workers and their jobs are properly safeguarded.”

In response to the US tariffs on China, the country’s foreign ministry suggested soybeans, airplanes, cars and cotton could be targeted.

Goods targeted for possible higher Chinese tariffs include wine, apples and ethanol, which would hit agricultural areas where voters supported Trump in the 2016 presidential election.